President Trump recently published his tax reform outline, “2017 Tax Reform for Economic Growth and American Jobs” – and his outline proposes tax cuts as well as tax simplification.
Although the provisions in Trump’s outline is his wish list for tax reform, it is not certain at all whether much or anything that he is promoting will be able to withstand the legislative process. The Wolf Group expects that the President will lobby Republicans in the House of Representatives, since all tax bills must begin their journey in the House and work their way to the Senate. Finally, when both legislative bodies pass a tax reform bill, it will ultimately be either signed into law by the President or vetoed. This process is likely to take many months and according to Dale Mason, The Wolf Group International Tax Director, “I don’t expect the final tax reform bill – if any – to look much like the President’s outline proposal and I expect the bill’s final push to run up against the Christmas recess.”
Nevertheless, The Wolf Group shares some of the President’s reform items below to keep its clients abreast of potential tax changes that may impact them.
Accordingly, the President would replace and lower the current individual tax rates reducing them from seven brackets to three. Under the proposal, the three brackets would be 10%, 25% and 35%. Currently, the highest individual income tax rate is 39.6%
The President also proposes to double the standard deduction.
Under the White House proposal, all itemized deductions would be eliminated except for the mortgage interest and the charitable contributions deductions.
The President’s outline appears to keep the current capital gains rate and qualified dividend tax rate at the top rate of 20%.
Net Investment Income Tax
Under current law, the Net Investment Income (“NII”) imposes a 3.8% tax on the investment income of certain higher-income taxpayers. The President’s proposal repeals the net investment income tax.
The current federal estate tax is 40% of assets transferred at death in excess of a $5.49 million exemption (2017 amount). The President calls for an elimination of the federal estate tax.
Alternative Minimum Tax
Under the president’s proposal, the Alternative Minimum Tax would be repealed. The AMT is a parallel tax regime and is intended to ensure that higher income individuals pay at least some income tax.
International taxation of US citizens
Although calling for a territorial tax regime for corporations, the president has not made any comments regarding the global taxation of U.S. citizens. This area of the law is of particular interest to The Wolf Group and we will keep clients abreast of developments accordingly.
Treasury Secretary Mnuchin said that the Administration is “going to move as fast as we can” on tax reform. He has also said that tax reform will be accomplished by the end of 2017.
If you would like to discuss your particular tax position and the potential implications of President Trump’s proposed tax plan with an advisor, please contact The Wolf Group, or schedule an appointment by contacting our New Client Lead, Fan Chen, at (703) 652-1737.